Correlation Between FIRST NATIONAL and GOLD ROAD

Can any of the company-specific risk be diversified away by investing in both FIRST NATIONAL and GOLD ROAD at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FIRST NATIONAL and GOLD ROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FIRST NATIONAL FIN and GOLD ROAD RES, you can compare the effects of market volatilities on FIRST NATIONAL and GOLD ROAD and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FIRST NATIONAL with a short position of GOLD ROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST NATIONAL and GOLD ROAD.

Diversification Opportunities for FIRST NATIONAL and GOLD ROAD

-0.1

Correlation Coefficient

FIRST NATIONAL  GOLD ROAD

Good diversification

The 3 months correlation between FIRST and GOLD is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding FIRST NATIONAL FIN and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES and FIRST NATIONAL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FIRST NATIONAL FIN are associated (or correlated) with GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of FIRST NATIONAL i.e., FIRST NATIONAL and GOLD ROAD go up and down completely randomly.

Pair Corralation between FIRST NATIONAL and GOLD ROAD

Assuming the 90 days horizon FIRST NATIONAL is expected to generate 1.7 times less return on investment than GOLD ROAD. But when comparing it to its historical volatility, FIRST NATIONAL FIN is 1.1 times less risky than GOLD ROAD. It trades about 0.07 of its potential returns per unit of risk. GOLD ROAD RES is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  108.00  in GOLD ROAD RES on October 20, 2024 and sell it today you would earn a total of  34.00  from holding GOLD ROAD RES or generate 31.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

FIRST NATIONAL FIN  vs.  GOLD ROAD RES

FIRST NATIONAL FIN

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST NATIONAL FIN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FIRST NATIONAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GOLD ROAD RES

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FIRST NATIONAL and GOLD ROAD

The main advantage of trading using opposite FIRST NATIONAL and GOLD ROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST NATIONAL position performs unexpectedly, GOLD ROAD can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GOLD ROAD will offset losses from the drop in GOLD ROAD's long position.

The idea behind FIRST NATIONAL FIN and GOLD ROAD RES pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.